Objective research to aid investing decisions
Value Allocations for Aug 2018 (Final)
Cash TLT LQD SPY
Momentum Allocations for Aug 2018 (Final)
1st ETF 2nd ETF 3rd ETF
CXO Advisory

Investing Research Articles

Dumb Individual Investors and Smart Companies?

In their April 2005 paper entitled “Dumb money: Mutual Fund Flows and the Cross-section of Stock Returns”, Andrea Frazzini and Owen Lamont tackle a range of analyses tied to mutual fund inflows and outflows to determine whether or not these flows represent rational behavior on the part of individual investors. Do the flows predict abnormal returns for the underlying stocks? What do they mean for the wealth of the individuals causing them? By studying flows associated with domestic mutual funds from 1980 to 2003, they find that: Keep Reading

Going with the Flows

In their May 2005 paper entitled “Asset Fire Sales (and Purchases) in Equity Markets”, Joshua Coval and Erik Stafford examine the effects on stock prices of mutual funds forced to sell (buy) because of predictable outflows (inflows) of funds based on their past performance. Does such forced selling and buying present predictable opportunities for front-running? By studying mutual fund transactions caused by capital flows from 1980 to 2003, they conclude that: Keep Reading

Detecting Wisdom in a Crowded Market

In The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations, James Surowiecki identifies and discusses the three conditions necessary for a crowd to make good group decisions. Applied to the stock market, good decisions means stock prices that reflect the true values of underlying assets. As depicted in the figure below, the three conditions are: Keep Reading

Expert Overconfidence?

In media interviews and in their own columns, expert investors often project high levels of confidence regarding their opinion of market direction and their stock recommendations. Are they overconfident with respect to their private information and/or abilities? In their paper “Overconfidence of Professionals and Lay Men: Individual Differences Within and Between Tasks?”, Markus Glaser, Thomas Langer and Martin Weber analyze whether professional traders and investment bankers are overconfident in their judgments to the same degree as non-professionals. Based on testing of 33 professional traders and 90 investment bankers, and of control groups of advanced students specializing in finance and banking, they conclude that: Keep Reading

The 5-Star Kiss of Death

In his paper “The Kiss Of Death: A 5-Star Morningstar Mutual Fund Rating?”, appearing in the second quarter 2005 issue of the Journal Of Investment Management, Matthew Morey examines the performance of mutual funds immediately after first achieving a Morningstar 5-star rating. Focusing on diversified domestic stock funds from July 1993 to July 2001 (273 funds), he concludes that: Keep Reading

Stock Market Forecasting

If your crystal ball has not been working so well… Keep Reading

Do Stocks Ever Hit Analyst Target Prices?

In their March 2005 paper entitled “Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability?”, Mark Bradshaw and Lawrence Brown test the accuracy of 12-month stock price targets both for individual analysts and for analysts overall. Using a filtered sample of about 100,000 individual 12-month stock price targets from Thomson Financial over the period 1997-2002, the authors conclude that: Keep Reading

What Makes Shorts Throw in the Towel?

In their February 2005 paper entitled “Holding on to Your Shorts: When do Short Sellers Retreat?”, Pavel Savor and Mario Gamboa-Cavazos examine NASDAQ trades during the period June 1988 through August 2001 to determine the circumstances in which short sellers choose to increase their common stock positions and those in which they choose to cover. They focus on stocks unlikely to have unusual short sale constraints.The authors find that: Keep Reading

The Animal Spirits of Day-Trading

In the March 2005 update of their paper entitled “Fear and Greed in Financial Markets: A Clinical Study of Day-Traders”, Andrew Lo, Dmitry Repin and Brett Steenbarger examine possible links between psychological factors and trading performance in a sample of 80 day-traders recruited from a five-week on-line training program offered by Linda Bradford Raschke. Interaction with study participants occurred via anonymous email and online questionnaires. The authors find that: Keep Reading

The Best Benchmarkers, Ever!

In their April 2005 draft of “History and the Equity Risk Premium”, two pioneers in the definition and measurement of the equity risk premium, William Goetzmann and Roger Ibbotson, recount the history of this essential benchmark for stock investment returns. Then, they update their estimate of its value for U.S. equities over the past two centuries. Their conclusions are: Keep Reading

Daily Email Updates
Login
Research Categories
Recent Research
Popular Posts
Popular Subscriber-Only Posts